Plummet in U.S. Consumer Confidence Highlights Economic Uncertainty Amid Election Run-Up

Consumer confidence in the U.S. saw its steepest drop in three years this September, driven by concerns over the labor market. Despite growing inflation expectations, many households still plan to buy homes within six months. The Federal Reserve's recent rate cuts and political climate add complexity to the economic outlook.

U.S. consumer confidence took a significant hit in September, marking the largest drop in three years, according to a Conference Board survey released Tuesday. Concerns over the labor market contributed to the decline, although plans to purchase homes saw an uptick.

Inflation expectations for the coming year also rose, dampening economic optimism ahead of the November 5 presidential election. Despite the fall in confidence, many consumers expressed continued interest in travel, dining out, and movie-going, which could support consumer spending and economic growth.

The Federal Reserve's recent 50 basis point rate cut, the first since 2020, aims to maintain low unemployment, which currently stands at 4.2%. Senior economist Ben Ayers noted that further rate cuts could bolster consumer optimism and stave off a severe economic downturn.

The consumer confidence index fell from 105.6 in August to 98.7 in September, with the biggest drops seen among middle-aged and lower-income groups. Economists had expected a slight increase in the index.

(With inputs from agencies.)